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Money 2005 UK Mortgage Account RRS feed

  • Question

  • Some time ago, I set up a mortgage account in Money 2005 UK. At the time, I set it up for a single monthly combined payment of capital & interest, paid by Direct Debit from my current account to the Bank by way of bill payment.

    I now wish to split my mortgage payment into 2 monthly payments, creating two separate combined payments of capital & interest per month (e.g. 1st and 15th of the month); this, I am told, will save a lot of interest payable over the term of the loan and therefore reduce the loan period. However, I cannot work whether, and if so how, it is possible to change the existing mortgage loan terms to reflect this change. Every time I try to mess with the figures in the Change Loan Terms wizard, it comes out horribly wrong.

    Can you please assist?

    Monday, February 21, 2011 3:53 AM

All replies

  • It is not clear what you are doing. Is the operation to pay 50% of your previous monthly payment twice per month? Who told you that this operation would save money? I would be sceptical if it is not your bank telling you this. Are you really planning to pay that amount every two weeks rather than twice monthly? Is there a third party involved? What is the deal?

    Anyway, if this is a new arrangement with your bank/mortgage company, then I would treat this a re-finance. In setting up a loan in which you are borrowing in Money, it is best to not tell Money the interest rate. Instead tell Money the amount of the payments and payment schedule, and to let Money compute the interest.

    I know there are some extra complexities in UK mortgages. http://umpmfaq.info/faqdb.php?cat=23 is US-oriented, but it may offer some useful tips.

    Monday, February 21, 2011 8:33 AM
    Moderator
  • Thanks for your reply, Cal.

    You are correct - I intend to pay 50% of my previous monthly payment twice per month, by arrangement with my Bank. This saves money because I will be making two principal and interest payments per month instead of one, meaning that more principal and interest payments are made over the term of the loan, so reducing the overall compound interest debt more quickly and thereby shortening the overall loan term. Hope that makes sense!

    I am aware that when you set up a new mortgage account in Money, the wizard gives you the option of twice monthly payments. However, I would like to continue with the existing Money mortgage account so that all my mortgage payments are shown in one account for the full life of the loan. Is there any way to do this, i.e. adjust the number of payments in my existing mortgage account to twice per month with the associated bill payment automatically updated accordingly?

    Many thanks again.

     

    Tuesday, February 22, 2011 3:38 AM
  • Not sure you can schedule it this way in Bills and Deposits, but you can enter a Loan Payment transaction at any time. My recllection is that Money will calculate the appropriate interest amount for that transaction and base future interest amount calculations on the new balance and the time elapsed to the next payment. Test it in a test file or a copy or a new account. Set one up monthly, enter a transaction by hand for the 15th, the scheduled one on the 31st, and so forth for several cycles to validate what it does.

    I'm thinking--and it's been years since I played around with it--that you can't really redefine the loan terms in ways that will work if you are trying to change the numbr of payments.

    I share Cal's skepticism on the math involved from the limited amount of data provided. Once you get past that first month with the payment of interest on the full principal for 15 days not 30 the effect seems to be minimal. And even that difference isn't huge since the reduction in principal amount is very small either way at the head end. An amortization model in Excel is easy to setup. (I just did it in five minutes to confirm my skepticism.) Likewise there are tools on the web to do it. I'd independently validate this to assure you are getting the effect you expect. When you get the effect eou expect, let us know what was going on besides just paying half the payment twice as often.

    Tuesday, February 22, 2011 5:54 AM
    Moderator